Exhibit 10.1


 


CEO
SEVERANCE AGREEMENT


 


 


CEO SEVERANCE AGREEMENT dated as of the 17th day of December 2009,
by and between The Ryland Group, Inc., a Maryland corporation (the “Company”),
and Larry T. Nicholson (the “Executive”).


 


In consideration
of the mutual covenants and agreements of the parties set forth in this
Agreement, and other good and valuable consideration the receipt and
sufficiency of which are acknowledged, the parties agree as follows:


 


1.                                    Position and
Responsibilities.  The Executive shall serve as the President
and Chief Executive Officer of the Company. 
In his capacity as President and Chief Executive Officer, the Executive
shall be the Company’s highest ranking executive officer and shall have full
authority and responsibility for formulating and administering the plans and
policies of the Company subject to the control of the Board of Directors.


 


2.                                    Performance of Duties.  The Executive
shall devote his full time attention and energies to the Company’s business and
will not engage in consulting work or any business for his own account or for
any person, firm or corporation.  The
Executive may serve as a director of other companies so long as this service
does not interfere with the performance of his duties with the Company.  In accordance with the “Guidelines on
Significant Corporate Governance Issues,” the Executive “will advise the
Chairperson of the Nominating and Governance Committee in advance of accepting
any directorship with a for-profit entity, to allow for a review of potential conflicts”
and to allow for an assessment that service as a director will not interfere
with the performance of the Executive’s duties with the Company.  The Nominating and Governance Committee will
continue to monitor and assess the appropriateness of the Executive’s service
as a director with other for-profit entities in light of the Executive’s duties
with the Company.


 


3.                                    Employment Termination.


 


3.1                            Termination Due to Death.  In the event
the Executive’s employment is terminated by reason of death, the Executive’s
benefits shall be determined in accordance with the Company’s Retirement, SERP,
insurance or other applicable program then in effect.  In addition, the Company shall pay to the
Executive’s beneficiaries or estate a pro rata share of the Bonus for the year
in which the termination occurs based on the Executive’s Bonus program and the
results of the Company for that fiscal year. 
This pro rata Bonus shall be determined by multiplying the Bonus for the
applicable fiscal year by a fraction, the numerator of which is the number of
days in such fiscal year prior to the date of termination and the denominator
of which is the total number of days in such fiscal year.  The pro rata Bonus shall be paid in a lump
sum within sixty (60) days after the end of the applicable fiscal year, unless Section 3.6
is applicable to this payment.


 


3.2                            Termination Due to
Disability.  In the event the Executive becomes Disabled
(as defined below) and is unable to perform his duties for more than one
hundred twenty (120) days during any period of twelve (12) months or, in the
reasonable determination of the Board of Directors, the Executive’s Disability
(as defined below) will exist for more than one hundred twenty (120) days, the
Company has the right to terminate the Executive’s employment and the Company’s
obligation to pay and provide compensation shall expire, except the Company
shall pay to the Executive a pro rata share of the Bonus for the year in which
the termination occurs based on the Executive’s Bonus program and the results
of the Company for that fiscal year determined as provided in Section 3.1.  The pro rata Bonus shall be paid in a lump
sum within sixty (60) days after the end of the applicable fiscal year, unless Section 3.6
is applicable to this payment.  The
Company shall pay the Executive his base salary through the effective date of
termination and shall pay all benefits to which the Executive has a vested
right at that time in accordance with the terms of the plan, document or
agreement governing such benefits.


 


The term “Disabled”
or “Disability” means the incapacity of the Executive, due to injury, illness,
disease or bodily or mental infirmity, to engage in the performance of his
duties 


 


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with the Company.
A Disability is determined by the Board of Directors upon receipt of and in
reliance on competent medical advice from one or more individuals selected by
the Board who are qualified to give professional medical advice, as well as any
individuals who are involved with the treatment and assessment of the Executive’s
Disability and who are qualified to give professional medical advice.  These individuals may also assist the Board
of Directors in its determination of the period of time during which the Disability
will exist and its impact on the Executive’s performance in accordance with the
prior paragraph of this Section 3.2.


 


3.3                            Voluntary Termination by
the Executive.  The Executive may terminate his employment
with the Company at any time by giving the Board of Directors written notice of
intent to terminate delivered at least ninety (90) days prior to the effective
date of such termination.  Upon the
expiration of this ninety (90) day period, the termination by the Executive
shall become effective.  The Company
shall pay the Executive his base salary through the effective date of
termination and shall pay all benefits to which the Executive has a vested
right at that time in accordance with the terms of the plan, document or agreement
governing such benefits. The Executive shall not receive a Bonus for the fiscal
year in which voluntary termination occurs.


 


3.4                            Termination by the Company
Without Cause.  The Board of Directors may terminate the
Executive’s employment for reasons other than death, Disability or for Cause
(as defined in Section 3.5) by notifying the Executive in writing at least
sixty (60) days prior to the effective date of termination.  Upon the expiration of this sixty (60) day
period, the termination by the Company is effective.  Within thirty (30) days after the date of
termination, unless Section 3.6 is applicable to this payment, the Company
shall pay to the Executive a lump sum cash payment equal to the aggregate
amount of twenty-four (24) months of the base salary as in effect prior to the
date of notice of termination.  The
Executive’s participation in the life, medical, dental, vision, AD&D,
prescription drug, long-term disability and executive medical reimbursement
programs provided to the Executive prior to the date of notice of termination
shall be continued or equivalent benefits provided by the Company, at the Company’s
expense, for a period of two (2) years from the date of the Executive’s
Separation from Service.  Also, within
thirty (30) days after the date of termination, unless Section 3.6 is
applicable to this payment, the Company shall pay to the Executive a lump sum
cash payment equal to the value of coverage under the Company’s executive life
insurance program, personal health services allowance and health club benefit program
for a period equal to twenty-four (24) months.  The Company shall pay to the Executive a pro
rata share of the Bonus for the year in which the termination occurs based on
the Executive’s Bonus program and the results of the Company for that fiscal year
determined as provided in Section 3.1. 
The pro rata Bonus shall be paid in a lump sum within sixty (60) days
after the end of the applicable fiscal year, unless Section 3.6 is
applicable to this payment. The Company shall also pay to the Executive all
benefits to which the Executive has a vested right at the time of termination in
accordance with the terms of the plans, documents or agreements governing those
benefits.  The Executive shall be fully
vested in any unvested grants of equity, stock option or restricted stock unit
awards previously received and shall be fully vested in any prior year awards
that remain unvested or any awards made for the fiscal year in which
termination occurs under the TRG Incentive Plan or any successor plan.  All vested awards under any equity incentive
or other incentive programs shall be paid in accordance with the terms of the
governing plan or program, notwithstanding any provision of the governing plan
or program calling for forfeiture of benefits upon termination. Within thirty
(30) days after the date of termination, unless Section 3.6 is applicable,
the Company shall also pay the Executive a separation from service lump sum
cash payment for the year in which termination occurs equal to twice the highest
amount of the Bonus paid or payable in respect of the three previous fiscal
years prior to the year in which termination occurs as well as a separation
from service equity award equal to the highest restricted stock award granted
during the three previous fiscal years prior to the year in which termination
occurs.  The separation from service
equity award described above shall be paid in the form of a grant of
unrestricted shares of common stock of the Company; provided, however,
that if 


 


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for any reason a
grant of such shares cannot be made to the Executive, then the separation from
service equity award shall be paid in the form of a lump sum cash payment in an
amount determined by multiplying (i) the closing price for the common
stock of the Company, as reported on the New York Stock Exchange, as of the day
immediately preceding the payment date, times (ii) the number of shares
that otherwise would have been granted under the separation from service equity
award.  In accordance with the “Policy
Regarding Stockholder Approval of Severance Agreements,” which was adopted by
the Board of Directors on December 6, 2006 (the “Severance Policy”), all
payments and Benefits (as such term is defined in the Severance Policy) provided
pursuant to this Section 3.4 are subject to and shall not exceed the
Severance Benefits Limitation set forth in the Severance Policy.  In the event that the aggregate present value
of all payments and Benefits (as such term is defined in the Severance Policy)
to be provided under this Section 3.4 would, but for the preceding
sentence, exceed the Benefits Threshold (as such term is defined in the
Severance Policy), the payments and Benefits shall be reduced or forgone to
comply with the Severance Benefits Limitation set forth in the Severance Policy
by first reducing the pro rata Bonus payment, next reducing any other lump sum
cash payments and then reducing the Benefits provided.


 


3.5                            Termination for Cause.  The Board of
Directors may terminate the Executive’s employment at any time for “Cause.”  “Cause” is determined by the Board of
Directors and is defined as the Executive’s (i) willful and continued
failure to perform the material duties of his position after receiving notice
of such failure and being given reasonable opportunity to cure such failure; (ii) willful
misconduct which is demonstrably and materially injurious to the Company; or (iii) conviction
of a felony.  No act or failure to act on
the part of the Executive shall be considered “willful” unless it is done or
omitted to be done in bad faith or without reasonable belief that the action or
omission was in the best interest of the Company.  In the event this Agreement is terminated by
the Board of Directors for Cause, the Company shall pay the Executive his base
salary through the date of termination and the Executive shall forfeit all
rights and benefits he is entitled to receive including any right to a Bonus
for the fiscal year in which the termination occurs, but excluding any benefits
in which he has a vested right.


 


3.6                            Delay of Payment Pursuant
to Section 409A.  Should any of the payments
made to the Executive in accordance with Section 3 of this Agreement be
determined to be payments from a nonqualified deferred compensation plan, as
defined by Section 409A of the Internal Revenue Code of 1986 as amended
(the “Code”), these payments, to the extent otherwise payable within six (6) months
after the Executive’s date of Separation from Service, will be made on the date
that is six (6) months after the Executive’s date of Separation from
Service.  For purposes of this Section 3,
a “Separation from Service” means an anticipated permanent reduction in the
level of bona fide services to twenty percent (20%) or less of the average
level of bona fide services performed over the immediately preceding thirty-six
(36) month period.  For purposes of Section 409A
of the Code, the payments to be made to the Executive in accordance with Section 3
of this Agreement shall be treated as a right to a series of separate payments.


 


Also, should any
of the payments to be made to the Executive in accordance with Section 3
of this Agreement be determined to be an acceleration of payment from a
nonqualified deferred compensation plan in violation of Code Section 409A,
such payment shall not be made until the date determined in accordance with the
terms of the plan, document or agreement governing such deferred compensation.


 


4.                                Dispute Resolution. Either the Executive or the Company may elect to have
any good faith dispute or controversy arising under or in connection with this
Agreement settled by arbitration by providing written notice of such election
to the other party specifying the nature of the dispute to be arbitrated.  If arbitration is selected, such proceeding
shall be conducted before a panel of three (3) arbitrators sitting in a
location agreed to by the Company and the Executive within fifty (50) miles
from the location of the Executive’s principal place of employment in
accordance with the rules of the American Arbitration Association.  Judgment may be entered on the award of or
decision made by the arbitrators in any court having competent
jurisdiction.  To the extent that the Executive


 


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prevails in any
litigation or arbitration seeking to enforce the provisions of this Agreement,
the Executive is entitled to reimbursement by the Company of all expenses of
such litigation or arbitration, including any legal fees and expenses and any
costs and disbursements.


 


The Executive
shall be entitled to reimbursement of the fees and expenses described under
this Section 4 during the period commencing on the effective date of this
Agreement and ending on his death.  Any
reimbursement of fees and expenses under this Agreement shall be made on or
before the last day of the year following the year in which the expense is
incurred.  The amount of fees and
expenses eligible for reimbursement during a year shall not affect the expenses
eligible for reimbursement in any other year except for any medical
reimbursement arrangement providing for the reimbursement of expenses referred
to in Section 105(b) of the Code. 
The right to reimbursement or in-kind benefits is not subject to
liquidation or exchange for another benefit.


 


5.                                    Release of Claims and
Obligations.  In consideration of the payments and benefits
to be provided as indicated in this Agreement, it is agreed that you, on behalf
of yourself, your heirs, representatives and assigns, release the Company from
any and all claims, causes of action, demands, obligations, agreements,
promises, liability, damages, costs and/or fees arising out of or relating to
your employment or your separation from employment and any claim for equitable
relief or recovery of monies or damages, any contract, express or implied, any
tort, or any federal, state or local law relating to employment, including
employment discrimination, such as a fair employment practice law (e.g., The
California Fair Employment and Housing Act), and including, but not limited to,
42 U.S.C. §§ 1091, 1981 and 1983, Title VII of the Civil Rights Act of
1964,  the Age Discrimination in
Employment Act, as amended, the Employee Retirement Income Security Act, the
Rehabilitation Act, the Americans with Disabilities Act, the Civil Rights Act
of 1991, the Family and Medical Leave Act, the Fair Labor Standards Act and any
other local, state or federal law.  By
this paragraph, you are waiving any claims against the Company which includes
claims against the Company’s directors, officers, employees, agents and all
other related or affiliated persons.


 


6.                                    Miscellaneous.


 


6.1                            Mitigation. 
The Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under this Agreement,
and the obtaining of any other employment shall not result in a reduction of
the Company’s obligations to make the payments, benefits and arrangements
required to be made under this Agreement.


 


6.2.                        Entire Agreement.  Except as
provided in the next sentence, this Agreement supersedes any prior agreements
or understandings, oral or written, between the Executive and the Company with
respect to the subject matter hereof, and constitutes the entire agreement of
the parties with respect thereto. 
Nothing in this Agreement is intended to adversely effect any rights the
Executive may have under the Senior Executive Severance Agreement dated July 7,
2004, as amended, in the event of a termination of employment.  In the event of a Change of Control (as
defined in the Senior Executive Severance Agreement), the Executive has the right
as determined by the Executive, to have a termination of employment governed by
the provisions of the Senior Executive Severance Agreement and not by the
provisions of this Agreement.


 


6.3                            Modification.  This Agreement
shall not be varied, altered, modified, cancelled, changed or in any way
amended except by mutual agreement of the parties in a written instrument
executed by the parties or their legal representatives.


 


6.4                            Severability.  In the event
that any provision or portion of this Agreement shall be determined to be
invalid or unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected and shall remain in full force and effect.


 


6.5                            Tax Withholding.  The Company
may withhold all Federal, state, city or other taxes required pursuant to any
law or governmental regulation or ruling.


 


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6.6                            Beneficiaries.  The Executive
may designate one or more persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.  Such designation must be in a signed writing
acceptable to the Board of Directors, the Company or designees of the Board or
Company.  The Executive may change such
designation at any time.


 


6.7                            Board Committee.  Any action
taken or determination made by the Board of Directors under this Agreement may
be taken or made by the Compensation Committee or any other Committee of the
Board of Directors.


 


6.8                            Governing Law.  To the extent
not preempted by Federal law, the provisions of this Agreement shall be
construed and enforced in accordance with the laws of the State of California.


 


6.9                            Notice.  Any notices,
requests, demands or other communications required by or provided for in this
Agreement shall be sufficient if in writing and sent by registered or certified
mail to the Executive at the last address he has filed in writing with the
Company or, in the case of the Company, at its principal office.


 


IN WITNESS WHEREOF,
the Executive and the Company have executed this Agreement as of the date first
above written.


 


	
  THE RYLAND GROUP, INC.

  	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ William L. Jews

  	
   

  	
  /s/ Larry T. Nicholson

  
	
   

  	
  William L. Jews, Chairman

  	
   

  	
  Larry T. Nicholson

  
	
   

  	
  Compensation Committee of the

  	
   

  	
   

  
	
   

  	
  Board of Directors

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
  /s/ Timothy J. Geckle

  	
   

  	
   

  
	
   

  	
  Timothy J. Geckle, Secretary

  	
   

  	
   

  
						



 


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